Decision Making and Problem Solving


Decision making can be defined as the process through which managers identify organizational problems and attempt to solve them. Specifically, decision is part of problem solving in which managers make a choice from variable alternatives to solve a problem. Decisions or choice making therefore refers to a narrow set of activities involving choosing one option from a set of alternative options

Problem solving on the other hand refers to a broad set of activities involved in finding a set of action to correct unsatisfactory situation in the organization.

TYPES OF MANAGERIAL DECISIONS                                  

There are 3 types of managerial decisions

Strategic decisions

These are long-term decisions which settle the organization relationship with its environment and industry in which it competes e.g. product, services or markets. They are decisions which set the principal goals and objectives of the organization and strategies required to achieve them. They are usually complex in terms of the No. of variables which have to be considered before the final choice is made.

Administrative decisions

These decisions arise from conflicting demands of strategic and operational decisions. They are essentially concerned with setting the organization structural problems e.g. powers authority structure, communication methods to be used, and administration methods to be implemented.

Operational decisions

These are short term decisions which settle issues such as inputs to be used, output level, inventory level, allocation of resources, operational procedures etc. They tend to receive priority over other decision because of their importance in ensuring the smooth running and implementation of organizational activities.




  • Programmed decisions – These decisions cover routine decisions made by managers. Such decisions are covered by policies, rules and norms established by the organization. Such decisions do not require managerial input or discretion. They are predetermined decisions for handling routine problems in the organization e.g. procurement, college admission, issue of bank loans, dealing with disciplinary problems etc.

These decisions may be made with the help of computers

  • Non programmed decisions – These decisions deal with less routine and complex problems affecting the organization. They cover unique problems which cannot be handled by programmed methods. Such decisions are made in light of the variables influencing the problem. They require active involvement by managers to systematically analyse the problem and make a rational decision for solving it.

Types of organization problems requiring managerial decisions

  1. Crisis problems

A crisis problem is a difficulty requiring immediate action by managers e.g. discovery of a serious cash flow problem that has a high potential of quickly evolving to losses, major breakdown of machinery, critical shortage of essential input e.g. power, threat by employees to go on strike etc.

  1. Non Crisis Problem.

A non crisis problem is an issue which requires a solution but does not        simultaneously have the importance and immediate characteristics of crisis.    Many   of the decisions made by manager’s centre on non crisis problems e.g. A           factory that needs to be brought into conformity with the new state of anti             pollution standards during the next 3 years, an employee who is frequently late         for work, an employee who doesn’t meet deadlines or standards.

  1. Opportunity problem

This is a situation which represents strong potential for organizational gain if the appropriate actions are taken. Opportunity typically involves new ideas and is therefore a means for innovation.

NB: It should be noted that, opportunity problems involve ideas which must be used rather than real difficulties that must be solved e.g. a fast expanding market share, new markets to be explored, breakthrough in research and development which can help the organization to improve its products and services etc.


Decision making and problem solving involves the following steps:

  1. Problem definition – this involves investigating the situation by determining the root causes of the problem (problem diagnosis). A problem well defined is half solved.
  2. Generation of alternatives – alternatives are various approaches that may be used to solve a problem. Good solutions require good alternatives which should be developed though creativity. Problem solvers must stretch their minds and seek possible opportunities and solutions i.e. divergent thinking is required at this stage to come up with possible ideas for solving a problem.
  3. Evaluation and choice of alternatives – alternatives developed should be carefully evaluated and the best one chosen. This requires convergent thinking ie a narrowing on the best alternative to solve a problem. Evaluation and choice should be made in light of the organizations ability and availability of resources to implement the decision.
  4. Decision implementation – once a decision is made by settling on the right alternative, the decision should be implemented. This involves communicating the decision to individuals and managers concerned and making available all the necessary resources needed for effective implementation.
  5. Decision control and monitoring – This involves follow up or monitoring the decision outcome and taking appropriate action. If decisions are to be effective, steps must be taken to ensure that the necessary information on performance of a given decision is gathered and that contingency plans developed and implemented incase the decision does not turn out well.



  1. Poor problem definition – when a problem is not well defined and understood in terms of its root causes this may affect the collection of relevant data / information for decision making purposes
  2. Use of insufficient information for decision making – managers are sometimes forced to make decisions on the basis of the information they have at hand. There  may be less data input due to lack of some information required for decision making. This may affect the quality of decisions made.
  3. Poor evaluation and choice of alternatives – Lack of proper evaluation of alternatives may lead to wrong choices of the alternatives. Managers should exercise their rational judgment to make the best choices
  4. Time constraint – Time pressure on decision making may cause panic to decision makers. Hence poor decisions e.g. decisions on crisis problems and hurried attempt to find a solution
  5. Biased decision / effects of individual or group influences: – some powerful individual or groups in the organization may influence the decision outcome for personal or group gains e.g. a decision deliberately manipulated to favour a manager of a group in the organization.
  6. Lack of systematic approach to decision making. This may lead to poor decision outcomes
  7. Lack of training among decision makers / managers
  8. Lack of employee/ group involvement in decision making
  9. Poor management of information system – A company may lack proper data management system. This may affect storage, processing and dissemination of information to managers for decision making purposes.
  10. Uncertainty in the external environment – environmental changes may affect the information used for decision making purposes e.g. unpredictable economic / political environment may affect the information for investment or expansion decisions etc.



Individual managers can take the following steps to improve their decision making and problem solving abilities:

  • The manager / decision maker should be aware of various barriers to effective decision making and strive to overcome them e.g. biasness.
  • The decision maker should be careful to move systematically through the decision making and problem solving process. Failure to give all the stages the attention they deserve may lead to poor decisions
  • Information used for decision making and problem solving should be complete accurate and current
  • A large number of alternatives should be generated through creativity. This will offer managers the best selection of the right alternative
  • The decision makers should consider the use of computers to complement human problem solving techniques.
  • The manager should consider applying relevant mathematical and statistical tools in evaluation and choice i.e. management science techniques should be used to improve the objectivity and the quality of decisions made.
  • Group problem solving techniques should be considered i.e. use of committees or task forces
  • Forecasting techniques / SWOT analysis should be used to obtain environmental information, enhance forecasting and improve the quality of decisions made etc.


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